Debt-heavy govts to keep long-term bond yields climbing

Binaya Dahal

Editorial Intern, Financial Newswire

16 January 2026

Global bond markets face another year of rising long-term yields as governments worldwide will continue to issue debt to finance deficits, Head of Global Fixed Income and Chief Investment Officer at T. Rowe Price, Arif Husain says.

Husain said he expects long-maturity and high-quality government bond to rise substantially.

“My view on fixed income markets at the beginning of 2026 remains consistent with my perspective from 2025,” he said.

“Furthermore, when factoring in the flood of artificial intelligence (AI)-related debt supply, the volume of new bond issuance is even greater than I feared last year.”

The consequence, he believes, will be further steepening of global yield curves before bonds become attractive relative to cash.

In the US, the spread between cash rates and the 10-year Treasury yield was just over 30 basis points as of January 2, a level too narrow to draw investors out of cash, Husain said.

He estimates that a gap of around 150 to 200 basis points would be required before long-dated bonds become compelling.

Husain said some developed markets such as New Zealand, Canada and Japan have already established that type of yield curve.

“In New Zealand, the difference between cash and 10-year government note yields was more than 200 bps,” he said.

“In Canada, the same yield spread recently reached 120 bps. In Japan, the difference between cash and 30-year government bond yields was nearly 270 bps.”

Until similar dynamics emerge in the US and other major markets, Husain believes government borrowing will continue to weigh on bond prices and keep long-term yields climbing.